Ukraine Says Russia Exports Terror as Offensive Stalls

Armed men wearing military fatigues stand guard by Armoured Personnel Carriers outside the regional state building seized by pro-Russian separatists in the eastern Ukrainian city of Slavyansk on April 16. Photographer: Genya Savilov/AFP via Getty Images

April 16 (Bloomberg) -- Ukraine accused Russia of fueling
terrorism in its eastern regions as a move against separatists
in the town of Kramatorsk stalled on the eve of an international
conference aimed at defusing the crisis.

Ukrainian government troops attempted to press on with an
anti-separatist offensive that freed an airfield near Kramatorsk
yesterday. Authorities sent armored vehicles into the Donetsk
region town, only to have some of them seized by pro-Russian
activists who also disarmed a number of soldiers.

“Russia has a new commodity for export in addition to oil
and gas -- terrorism,” Prime Minister Arseniy Yatsenyuk told a
government meeting today in Kiev. “It’s become clear our
Russian neighbors have decided to build a new Berlin Wall and
want a return to the Cold War.”

U.S. President Barack Obama joined Yatsenyuk in blaming
Russia, saying in an interview with CBS News that Vladimir
Putin’s government has “supported, at minimum, non-state
militias in southern and eastern Ukraine.”

The airport operation marked Ukraine’s first foray against
armed activists holding official buildings in cities near the
Russian border. Efforts to contain the insurgency risk
escalating tensions with Russia, which denies involvement in the
unrest and has warned of a potential civil war. NATO says Russia
has 40,000 troops massed on Ukraine’s border after its
annexation of Crimea last month.

Geneva Meeting

With tensions running high, envoys from Ukraine, Russia,
the U.S. and European Union are scheduled to hold talks tomorrow
in Geneva. Ukraine’s parliament today rejected a Russian call to
send representatives of its eastern regions to the negotiations.

The U.S. and its European allies are threatening a new
round of penalties against Russian interests unless Russia
demonstrates it will pull back from confrontation in Ukraine.

“Talk doesn’t replace actions when it comes to what’s
happening on the ground,” Marie Harf, a State Department
spokeswoman, said today in Washington. “We will continue to
prepare, as we’ve said, additional sanctions and other steps if
we can’t get some de-escalation here.”

White House press secretary Jay Carney told reporters in
Washington the U.S. is “actively preparing new sanctions.”

In the CBS interview Obama didn’t specify how far the U.S.
and EU would go in trying to squeeze the Russian economy or what
would trigger more sanctions.

Vehicle Seized

In Ukraine, the Defense Ministry said on its Facebook page
that six armored personnel carriers that entered Kramatorsk this
morning were seized by “extremists” and moved to Slovyansk, 15
kilometers (9 miles) away.

Five of the vehicles in the center of Slovyansk this
afternoon were surrounded by local residents, some of them
children, taking photographs, as well as by masked men in
camouflage with guns.

As evening fell in Kramatorsk, another convoy of 15
Ukrainian armored vehicles was being disarmed amid a crowd of
separatist activists.

“The guys don’t want any escalation,” one of the activist
leaders, Vadim Chernyakov, told reporters. “They had an order
to come to Kramatorsk. They should be praised for the fact that
they didn’t use weapons against the people.”

The U.S. and the EU will use the talks in Geneva to assess
whether Russia is genuinely interested in reducing the tensions
in Ukraine, according to a U.S. State Department official who
asked not to be identified discussing the diplomatic
negotiations.

Decentralizing Power

The U.S., the EU and Ukraine will make the case that
Russian concerns about decentralizing power in Ukraine and
protecting the rights of Russian speakers in the country can be
addressed constitutionally, according to the official, who said
Ukraine would outline its plans for May 25 elections.

In the meantime, preparatory work is at an “advanced
stage” on economic sanctions against Russia, Maja Kocijancic, a
spokeswoman for the European Union’s foreign-affairs chief,
Catherine Ashton, told reporters today in Brussels.

The European Commission today gave ambassadors of the
bloc’s 28 countries details of the potential impact on their
economies of possible broader sanctions and gave them a week to
respond, according to an EU official who spoke on condition of
anonymity.

Visa bans and asset freezes imposed on individuals by the
U.S. and EU have already had an impact. Russia’s Micex Index of
equities has lost 12.1 percent this year, though it rose 0.9
percent today.

Sanctions’ Impact

The unrest has also hurt Ukrainian asset prices. The
hryvnia is this year’s world’s worst performer against the
dollar among more than 100 currencies tracked by Bloomberg with
a 27 percent loss. It surged for a second day today after an
emergency interest-rate increase, gaining 5.3 percent to 11.3
per dollar.

A delegation of U.S. lawmakers will meet with Ukrainian
leaders in Kiev next week. The bipartisan group of eight will
talk with Ukrainian presidential candidates, nongovernmental
organizations and “representatives of ethnic and religious
minority communities,” the House Foreign Affairs panel said in
a statement outlining the trip.

The committee’s chairman, Republican Representative Ed
Royce of California, said lawmakers will “take a measure” of
U.S. efforts to help Ukraine maintain its sovereignty.

NATO Defenses

As nearby countries such as the Baltic nations fret about
security, the North Atlantic Treaty Organization vowed to beef
up defenses and upgrade contingency plans.

“We will have more planes in the air, more ships on the
water and more readiness on the land,” Secretary General Anders
Fogh Rasmussen said today in Brussels after the 28 NATO allies
approved the changes.

Obama said NATO will stand by its member countries and that
Putin understands that U.S. and NATO forces are “significantly
superior” to Russia’s.

“They’re not interested ina military confrontation with
us,” he said.

NATO stopped short of setting up permanent bases in eastern
Europe, an idea that caused discomfort in Germany in particular.
Instead, the alliance decided to step up training of eastern
forces and conduct more military maneuvers in the region.

The alliance’s top military commander, U.S. Air Force
General Philip Breedlove, said there’s been no reduction in
Russian forces near the frontier with Ukraine, which remain in a
“very high” state of readiness.

Emergency Meeting

“It is either a very large coercive force or it is a force
as capable and able of crossing the border accomplishing the
objectives it might be given,” he told reporters at NATO
headquarters in the Belgian capital.

In the eastern city of Donetsk, an emergency meeting of the
Party of Regions urged separatists to lay down their arms, the
Interfax news service reported. The party, which backed
Ukraine’s ousted pro-Russian president, Viktor Yanukovych,
called for greater budgetary autonomy for the regions, direct
elections of governors, and for Russian to be the second
official language. The meeting didn’t support Russian calls for
a federal Ukraine, Interfax said.

There are at least 450 Russian soldiers without army
insignia in the Donetsk region, according to Vasyl Krutov, head
of the anti-terrorist center of Ukraine’s SBU security service,
the Interfax news service said today.

Russian Presence

On Ukraine’s western border, Moldova’s breakaway
Transnistria region appealed to Putin to recognize it as
independent.

“Transnistria is a Russian-language land, more than 90
percent of Transnistrians speak and think in Russian,” the
region’s parliament said in a statement on its website.

Russia has maintained troops in Transnistria since a 1992
military conflict with Moldova as part of a peace-keeping force
that includes Moldovans, Transnistrian militants and Ukrainian
military observers.

While Russia denies it’s behind the separatism in Ukraine,
Defense Minister Anatoly Antonov responded to U.S. and European
complaints over the troop buildup near Ukraine’s border by
saying the army is free to do what it wants at home.

“All these horror stories that Russia is hanging over
Ukraine today, and tomorrow, Russia, as some politicians said,
will almost reach the English Channel, or Bordeaux, or maybe the
Cote d’Azur -- all this is nonsense,” he told state television.

Putin will give his assessment of U.S. and European
sanctions in his annual televised phone-in tomorrow, his
spokesman, Dmitry Peskov, said on Rossiya 24 television.

Russia’s Foreign Ministry said in a statement that the U.S.
should “take into account the catastrophic consequences of such
reckless support” for the Ukrainian government.